Liberty Mines Inc.

Liberty Mines Inc.

November 12, 2008 08:30 ET

Liberty Reports Third Quarter 2008 Financial Results

EDMONTON, ALBERTA--(Marketwire - Nov. 12, 2008) - Liberty Mines Inc. ("Liberty or the Company") (TSX:LBE) continued production at the Redstone mine through the third quarter of 2008 producing 559,395 accountable pounds of nickel at an average cost of US$6.46 per pound which includes mining, milling, smelting, refining, price participation and marketing costs but excludes mine depletion and operating asset amortization charges. On September 15, 2008 the Company commenced pre-production at the McWatters mine and 5,284 tonnes of ore were broken and 3,894 of the broken tones were shipped to the Redstone mill for metallurgical testing and processing. The metallurgical recovery of ore grading 0.59%-0.61% nickel from the disseminated upper zone of the 65m level of the mine varied from 87.1% to 88%, which was 3%-4% higher than predicted.

Recent changes to several key economic variables including the downturn in commodities prices and the overall economic slow-down have had a significant impact on the Company. As a result of the change in these economic variables, subsequent to the end of the quarter, the Company commenced a care and maintenance program at the Redstone mine and mill and McWatters mine on October 31, 2008.

Based on the current economic conditions and downturn in commodities prices, the Company's management also conducted a review of the operating performance and estimated future cash flows of the Company's Redstone mine at September 30, 2008. Based on this review, an asset impairment charge of $20,298,048 was recognized during the nine months ended September 30, 2008 which was applied against the carrying value of the exploration and development expenditures and pre-production operating costs associated with the Redstone mine.

The following table summarizes the Company's consolidated financial results for the three and nine month periods ended September 30, 2008.

Three months ended Nine months ended
September 30 September 30
2008 2007 2008 2007
Revenue $ 3,838,317 $3,712,715 $16,153,233 $ 3,712,715
Mining and processing
costs 3,760,866 2,439,035 11,426,310 2,439,035
Amortization depletion
of operating assets 3,270,300 1,477,592 9,066,126 1,477,592
Operating loss (3,192,849) (203,912) (4,339,203) (203,912)

General and
administrative expenses 1,216,092 434,288 4,177,886 888,205
Impact benefit agreement - - 1,033,958 -
Stock based compensation 454,328 400,769 1,621,281 1,294,489
Amortization and
accretion other assets 299,867 107,408 783,073 221,248
Interest and bank charges 37,715 33,871 188,375 (22,124)
Interest on long-term debt 896,036 - 1,340,505 -
Accretion interest expense 508,927 - 817,020 -
Foreign exchange loss
(gain) 1,122,033 13,951 1,043,985 (57,691)
Asset impairment charge 20,298,048 - 20,298,048 -
Loss on sale property
plant and equip 362,410 - 362,410 -
Loss before income
taxes (28,688,305) (1,194,199) (36,305,744) (2,528,039)

Future income taxes 2,595,000 561,137 4,471,592 1,224,413
Loss for the period $(26,093,305) $ (633,062) $(31,834,152) $(1,303,626)

Loss per share
- basic and diluted $ (0.32) $ (0.01) $ (0.39) $ (0.02)


September 30, December 31,
2008 2007
Working capital deficiency $(24,289,495) $(2,102,096)
Total assets $ 88,251,662 $86,839,787
Shareholders' equity $ 38,330,330 $72,458,763

The Company generated revenue for the three and nine month periods ended September 30, 2008 of $3,838,317 and $16,153,233 respectively. The third quarter revenue was significantly impacted by the continued decline in nickel prices which averaged 25% lower than the previous quarter of 2008.

Mining and processing costs for the three and nine month periods ended September 30, 2008 totaled $3,760,866 and $11,426,310. The mining cost per tonne for the three and nine month periods ended September 30, 2008 was $108.22 and $102.85, as compared to $111.54 for the fourth quarter of 2007. The increase in the mining cost per tonne quarter over quarter was a result of lower levels of development work being completed at the Redstone mine in the third quarter and a resulting increase in wages charged to operations.

Processing costs for the Redstone mill averaged $53.72 and $48.26 per tonne for the three and nine month periods ended September 30, 2008 compared to $34.27 per tonne for the fourth quarter of 2007. The increase in the mill processing cost per tonne is a result of additional operating salaries and wages as capital projects slowed in the third quarter.

The Company's net loss for the three and nine month periods ended September 30, 2008 were $26,093,305 ($0.32 per common share - diluted) and $31,834,152 ($0.39 per common share - diluted) respectively compared to $633,062 ($0.01 per common share diluted) and $1,303,626 ($0.02 per common share - diluted) for the comparable periods of 2007.

The Company's net loss in the third quarter of 2008 was significantly impacted by the $20,298,048 asset impairment charge on the Redstone mine, as discussed above. In addition, with the term loans and JJNICL credit facility secured in the second quarter of 2008, interest on long term debt and accretion interest expense of $1,404,963 for the three months and $2,157,525 for the nine months ended September 30, 2008 impacted the Company's net loss compared to the previous period.

In the third quarter of 2008, the Company sold the drum hoist located at the Redstone mine site for net proceeds of $1,400,000 and realized a loss of $362,410 on the sale. The net proceeds from this transaction were applied against outstanding accounts payable obligations with the Company who acquired the equipment.

Cash flow from operations for the three months ended September 30, 2008 were $2,087,685 compared to $483,953 in the previous quarter. The Company's cash flow from operations was negatively impacted in the third quarter of 2008 by the continuing decline in nickel prices. These fluctuations in commodity prices were offset by changes in non-cash working capital items which resulted in decreased accounts receivable balances quarter over quarter and increased accounts payable and accrued liabilities balances.

The Company will require additional financing in the fourth quarter of fiscal 2008 and the strengthening of commodities prices for operations at the Redstone and McWatters mines and the Redstone nickel concentrator to recommence. The Company has engaged Desjardins Securities to act as an advisor to perform a financial and strategic review of the Company and its assets with a view to provide advice in connection with any potential transaction that may arise from this review. In the interim, the Company did not make payments under capital lease and finance contracts subsequent to the end of the quarter. Although two leaseholders have retrieved their property, the remaining leaseholders and finance contract lenders are continuing to negotiate mutually agreeable arrangements with the Company, as the Company works toward the completion of financing and business combination transactions.

"The dramatic drop in the price of nickel has severely affected our operations as outlined in recent press releases. We are diligently working on creative financings and all other avenues to maximize shareholder value going forward", said Liberty's President and CEO, Gary Nash.

This press release contains non-GAAP measures like operating cost per tonne, cost per pound of nickel, etc. Please see the Corporation's MD&A on SEDAR for discussion of non-GAAP performance measures.

Complete results are also available on SEDAR and on the Company's website

About Liberty Mines Inc.

Liberty Mines Inc. is a producer of nickel and is focused on the exploration, development and production of nickel, copper, cobalt and platinum group metals from its properties in Ontario, Canada.


No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. This News Release includes certain "forward looking statements". All statements other than statements of historical fact included in this release, without limitation, statements regarding potential mineralization and reserves, exploration results, metallurgical recoveries, mining and processing costs and future plans and objectives of Liberty, are forward looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Liberty's expectations are exploration risks, commodity prices, assumed startup and operating costs detailed herein and from time to time in the filings made by Liberty with securities regulators.

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